Britain 'a barrier to financial stability'

City of London aerial viewLax UK laws on tax havens and short-selling are undermining global attempts to clean up the finance industry according to a new report form the New Economics Foundation. The report, Subverting Safer Finance, says the UK is in danger of being seen as "a financial rogue state".
The report sets out a number of areas where it says "the UK is holding back urgently needed regulation". It says the UK government is "currently trying to derail" an EU initiative to ban naked short-selling – selling shares without first buying them in the market – which follows a similar US ban.

There's also criticism of the failure to tackle tax havens in Crown Dependencies or Overseas Territories such as Jersey, Guernsey and the Cayman Islands. NEF says that despite UK government claims that it cannot influence tax havens in these territories, "a past history of intervention suggests otherwise".

Lagging behind

On efforts to regulate commodity trading, NEF accuses the UK government of "lagging ever further behind the US, and blocking EU attempts at reform", while London's Alternative Investment Market is criticised for attracting business "by driving down standards of transparency, governance and investor protection".

The report's author, Andrew Simms, says: "Pushing soft-touch regulation as good for an ailing economy is like doping a horse that is already sick from taking too many drugs. It isn't going to work and will probably make matters worse.

Lax regulation

And co-author Lydia Prieg said: "These findings contraststarkly with the dangers of Britain 'acting unilaterally' that are frequently voiced by the banking lobby in response to even the slightest hint of real reform. London can and should compete on the quality of its services, not on the laxness of its regulation and its tolerance of market abuse."

NEF calls for a range of measures including;
  • Introducing position limits on commodity speculators to prevent them driving up prices
  • Eliminating tax havens that are under UK control and working closely with international authorities to regulate global tax evasion and avoidance
  • Bringing the UK into line with the US, Japan, Hong Kong, Australia and India by banning naked short-selling.
Anne Pettifor, a NEF fellow and financial research director, said: "By refusing to reform the City, the government is condemning industry to a prolonged drought of lending and to high borrowing costs – not just in the UK, but around the world. We must return bankers to their role as servants of industry and society – not masters."

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